|HTC: THE FUTURE IS EMERGING MARKETS|
Oranjestad, Februari 4, 2013 - HTC, once the new phone darling on the mobile scene, is struggling. The company’s Q4 2012 results weren’t pretty, the stock has dropped 48 per cent in the last 12 months, and it is losing ground to Apple and Samsung. Shares were down on Monday by 1.55 per cent.
So what to do? Focus on emerging markets, of course.
In a results presentation on Monday, the company said it would look at “more affordable smartphone[s] tailor-made to meet local demand in emerging markets”.
The problem is, that’s not exactly a new idea. Nokia have tried a Chinese version of the Lumia – and its sales in China are down. Apple is focused on China, as are other phonemakers.
Of course, it’s not all about China – there are other emerging economies. But EMs as a whole aren’t in catch-up mode any more. According to data from Strategy Analytics, the EM smartphone market in 2012 has nudged above developed markets, receiving 53 per cent of worldwide shipments. That’s around 370m smartphones going to emerging markets last year – hardly a nascent, untapped market. In terms of smartphones per capita, there is clearly room to grow. But for phonemakers, over half your smarphones are likely to be EM-bound.
Of the 700m smartphones shipped worldwide in 2012, Samsung and Apple accounted for almost exactly half – 349m devices. The scale of the challenge for their competitors is clear.
So, back to HTC. The Q4 numbers make terrible reading: operating profit was T$600m ($20m), which represents a fall of 95 per cent year-on-year, and 88 per cent on the third quarter. That’s a collapse, in any sense. Can the company turn it around? There has been talk of a new high-resolution camera phone, dubbed the M7, which could ship sometime in February. But the company’s own forecast for the start of 2013 was bleak, suggesting that first-quarter revenue would possibly be 17 per cent lower than in the previous three months – worse than analysts had forecast.
And with operating margins as thin as 1 per cent in Q4 2012, compared to 12.7 per cent in Q4 2011, going cheap isn’t going to be easy. The company said it would look to offer phones in the 1,000-2000 renminbi range in China, but not below Rmb1,000. The company’s cheapest phone in China is currently Rmb1,999 ($320).
According to research firm IDC, HTC has lost fallen out of the top five smartphone makers worldwide, with competitors such as ZTE and Huawei gaining ground. According to some estimates, in Q4, HTC had less than 5 per cent of the total smartphone market. It’s a long way back.